CanaCo showed the following equity on its December 31, 2014, balance sheet:

Contributed capital

Preferred shares, $2 non-cumulative

Authorized: 50,000

Issued and outstanding: 0.............................................................................. $ -0-

Common shares

Authorized: Unlimited

Issued and outstanding: 50,000.............................................................. 6,800,000

Total contributed capital............................................................................. $ 6,800,000

Retained earnings ....................................................................................... 3,800,000

Total equity .................................................................................................... $10,600,000

The shareholders of CanaCo expressed concerns to the board of directors at the recent annual meeting that the market price of their shares has not changed significantly over the past 18 months, yet the company is very profitable. Net income for each of the past three years has been $1,800,000, $2,300,000, and $3,500,000, respectively. Cash dividends were paid in each of these years equal to 50% of net income.

Required

Using the elements of critical thinking described on the inside front cover, comment.